The Best Time to Refinance A Home Loan


As a homeowner, you may find that your home loan needs change over time. Interest rate fluctuations and available loan programs often leave homeowners asking themselves when should I refinance?

The decision to choose refinance depends on your current financial situation and long-term goals. Motives for refinancing can vary from reducing a monthly payment to capturing the equity in a home, and using that equity for improvements, or leveraging it to tackle other debts.

What is refinancing?

Refinancing is the act of replacing one home loan with a new loan that may feature more favorable terms. This may include a lower interest rate, lower monthly payments, or “cashing out” some of the equity built up in a home if the value has increased since the initial purchase.

Why refinance?

Building the case for a refinance really depends on the type of loan you currently have and what you’re trying to achieve. Evaluate which of the three types of loans you have below to help determine if refinancing makes sense for you.

  1. Fixed-rate loan

If you’re unsure whether you should refinance your fixed-rate loan, ask yourself these three questions:

  1. Is the current interest rate at least two points below the rate on your fixed-rate loan?
  2. Is your current 30-year loan less than 10 years old?
  3. Do you plan to stay in your home for a while?

If you answered yes, it might be time to consider your refinancing options.

  1. Adjustable-rate mortgage

Some homeowners who have an adjustable-rate mortgage (ARM) should consider refinancing to a fixed-loan rate when the ARM reaches at least two points above their original rate. If you qualify, you could lower your monthly payment with a fixed-rate loan that will not change over time and could save you money.

  1. Tapping home equity: “cash-out”

If the value of your home has increased and/or you’ve paid enough of your loan down to have positive equity, you can use refinancing as an opportunity to cash out some of that equity. Many homeowners use this to pay off other debts such as car loans, credit cards, student loans, etc. It can also be a great option for financing home improvement projects. (Consult your financial advisor on the consolidation of short-term debt into long-term debt.)

Getting started

If refinancing makes sense, Evergreen Home Loans™ has a step-by-step guide for a successful mortgage refinance process. For further assistance, contact a home loan officer; from there, we’ll help you determine a solution that makes sense for your homeownership needs.

Learn more about the refinancing process here.

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